paying daughter's health insurance through S

S Corp with 12 employees and a group health insurance plan is owned by mom & dad 50/50. Their daughter who lives a few States away is an officer of the corp. Mom & dad want to pay bring daughter on group plan even though she doesn't really work in the business and has not been receiving W2 in prior years.

Can S corp pay daughter's health insurance and give her a W2 with only the HI premiums in box 1 (and box 16)? In other words, does attribution under Section 318 allow this to work?

I suppose it is possible. The proper form of reporting the arrangement is as you've described.
Like many related employees, the wage she receives must be reasonable.

Also, it's important to note that while she'll have to properly report the SEHI as wages, she will not be able to take a page 1 deduction because she has no other wages from the company.

In other words, does attribution under Section 318 allow this to work?. What section 318(a)(1)(A)(ii) does is treat daughter as owning the stock owned by the parents. So whatever treatment applies to the parents applies to her. My question would be whether she is really an employee for tax purposes, given that she doesn't really work in the business and has not been receiving W2 in prior years.

My question would be whether she is really an employee for tax purposes, given that [i]she doesn't really work in the business and has not been receiving W2 in prior years.

Probably not but what do I know. IRS website includes corporate officers in its definition of employees when they receive compensation. Of course they're usually arguing for compensation and not against.

Follow up question that I can't seem to find an answer to. Can S corporation discriminate in its health insurance offer? In other words, can officers be on a gold plan while rank & file are only offered silver or bronze?

As long as the company isn't a large employer, s-corp SH/EEs can be reimbursed for whatever kind of plan they receive without restriction. They don't receive a tax-free employee benefit...it's all wage compensation to them (just not subject to FICA).

I wonder about the authority for this statement:

If an officer does not perform any services or only performs minor services and is not entitled to compensation, the officer would not be considered an employee.

. It comes from this non-authority: https://www.irs.gov/businesses/small-bu ... e-officers.

As long as the company isn't a large employer, s-corp SH/EEs can be reimbursed for whatever kind of plan they receive without restriction. They don't receive a tax-free employee benefit...it's all wage compensation to them (just not subject to FICA).

That's interesting. True even when the S has a group plan?

As long as the company isn't a large employer, s-corp SH/EEs can be reimbursed for whatever kind of plan they receive without restriction. They don't receive a tax-free employee benefit...it's all wage compensation to them (just not subject to FICA).

That's interesting. True even when the S has a group plan?

Let's play out this example: SH/EE is properly offered group coverage, but opts out. SH/EE chooses to go out and get a "Gold" insurance plan on their own. S-corp reimburses SH/EE for premiums paid out of pocket.
The answer is more nuanced if Medicare is the other plan, but the issues are not primarily rooted in taxation.

Thanks for the example. Probably a stupid question but do they have to be standalone plans? In other words, can the Company have a group plan that offers gold to the King & Queen and silver / bronze to the rank & file? The group plan renews 12/1.

In my experience, that has more to do with the provider of the plan than anything controlled by tax law.
Generally, I'd say no. Ownership is not an accepted discrimination dynamic.

Can a sole proprietor take a business deduction for reimbursements made to his employee/spouse for the cost of insurance offered through a retirement plan for which the sole proprietor is the retiree but the spouse is the only one covered while not offering reimbursements to the only other employee? Would this be compliant with ACA rules? There is only one participant in the plan, but would he not have to offer it to the other employee? Would that mean it is no longer a one-participant plan?

I had asked this under another thread, but think this is the one I meant to ask it under.

I have not seen anything that forbids this. Shareholder can cover themselves, and their family, and reimburse it thru the business(and deduct as Self Employed Health Insurance as long as they are not offered Health Insurance thru Spouse's work).

Can a sole proprietor take a business deduction for reimbursements made to his employee/spouse for the cost of insurance offered through a retirement plan for which the sole proprietor is the retiree but the spouse is the only one covered while not offering reimbursements to the only other employee?

If what you mean by this is that the SP individual is covered under their spouse's employer plan, then this does not qualify for the SEHI deduction. There isn't any discrimination issue with the SP's other employee, though.

No. Spouse is covered by insurance offered to SP through former employer as a retiree. Can SP reimburse spouse-employee the cost of the insurance and take it as a business deduction? SP is covered by different plan.

Through former employer = no SEHI

But is the retirement plan considered an employer? Usually the pension/retirement plans are an entirely different entity from the prior employer.

And the issue is not SEHI, but the deduction on the C as employee benefits.

Also note another employee for which no insurance is reimbursed.

I'm thoroughly confused.

I'm going to restate facts as I understand them:
SP is a retiree.
SP's spouse is offered coverage through SP's retirement plan. SP is not covered under this plan.
SP employs an unrelated employee and is considering or does employ spouse.
Question: Can SP deduct premiums paid to SP's retirement plan for health insurance under which spouse is covered as a reimbursement and not provide coverage or reimbursement to unrelated employee?

I would offer: No, presuming unrelated employee works as least as much as spouse.
There is a small exception for reimbursements to an employee's spouse's employer. See Notice 2013-54 "Integration Method" on pg8 for the example provided. I don't think this fits, but that's where I'm basing my conclusion.